News / Alliances sinking – EC says CBER 'no longer fit for purpose' and won't renew it

Photo 54699604 © Cosmin Iftode | Dreamstime.com

2024 increasingly looks like a watershed year for container shipping after the European Commission today announced it won’t renew the sector’s exemption to operating shipping alliances when current legislation expires on 25 April.

The Consortia Block Exemption Regulation (CBER) was introduced in 2009, after the EC banned the old conference system that allowed carriers to coordinate on pricing levels.

CBER allowed carriers to continue operating vessel-sharing agreements and pooling capacity, and was extended in 2014 and 2020.

But the EC has now concluded: “Overall, the CBER does not appear to be fit for its purpose any more, as it does not fulfil the criteria of effectiveness, efficiency and EU added value.”

Liner shipping alliances serving European trades will now fall under the EC’s general competition rules for horizontal cooperation between companies.

“This is welcome news and appears to be a normalisation of competition rules for liner shipping,” Global Shippers Forum director James Hookham told The Loadstar.

“They will be required to assess their co-operative actions under same guidance and criteria as applies to every other commercial sector.

“This needn’t be the end of consortia as we know them, just a bit more transparency and self-discipline expected amongst the lines, consistent with policies for all other sectors,” he explained.

It has been under evaluation since 2020 – a period characterised by wild swings in both freight rates levels and shippers’ access to capacity during the Covid era, as well a determined drive by cash-rich carriers into other supply chain sectors via vertical consolidation.

“By contrast with the stability seen in the prevalence of consortia, the evaluation period has been characterised by dramatic changes in other market circumstances that had previously been identified as driving the need for cooperation between carriers,” the EC’s decision paper, published today, says.

“More specifically, the evaluation period has seen a transitory and exceptional phase of excess demand over effective capacity and of record profits for carriers. This transitory and exceptional phase has temporarily interrupted the trend towards oversupply and low profitability in the sector.” it adds.

On the widespread support for the CBER among carriers and their lobby groups, particularly the World Shipping Council (WSC), the EC said: “Their feedback tends to show an incomplete or inconsistent understanding of the substantive provisions of the CBER, even among large carriers with proven antitrust experience and compliance resources.” And it further claimed the legislation had failed to bring “demonstrable benefits to European consumers”.

It said: “Market developments in the sector during the evaluation period tend to confirm both the inelasticity of demand for liner shipping services and the limited elasticity of supply. In combination, these two factors reduce the likelihood that any cost efficiencies achieved by carriers would be passed on to transport users.”

However, while the EC refused to blame the CBER regulation for causing the chaos seen in container supply chains since 2020, it suggested its effectiveness and efficiency during this unprecedented period was, “at best, limited”, and noted that the widespread opposition from shippers, forwarders, unions and port operators to extending the regulation showed deep divisions among supply chain partners.

“Certain shippers, at the height of the Covid-19 crisis, called for the immediate repeal of the CBER.” it noted.

“The CBER has also been a source of dissatisfaction on the part of the other players of the value chain, notably freight forwarders and port operators, which compete directly with vertically integrated carriers – the CBER has notably created the impression that they were treated unfairly and that there was no real level playing field in the maritime sector.”

It concluded: “Overall, it appears that the restoration of trust between the stakeholders necessary to build a resilient, integrated and efficient supply chain requires ensuring that the liner shipping sector is not perceived as being subject to looser scrutiny from antitrust enforcers than other industries.”

Global Shippers Forum’s Mr Hookham added: “GSF looks forward to examining the detail of the Commission’s thinking and working with other stakeholders in the supply chain to allow the new normal in liner shipping to work smoothly.”

John Butler, president & ceo of the World Shipping Council said: “We appreciate the European Commission’s recognition of the many benefits of vessel sharing to European industry and consumers, even if we disagree with the logic behind the decision to discontinue the CBER. The shift to general EU antitrust rules will create a period of uncertainty as carriers adjust to the new legal structure. Nevertheless, vessel sharing agreements will remain a fully legal and supported way for carriers to ensure efficient and sustainable transport for Europe.

“WSC is carefully reviewing the basis for the Commission’s position and looks forward to further dialogue to ensure regulatory clarity.”